Even as the domestic economic activity continues to sustain momentum, the monetary policy committee (MPC) of the Reserve Bank has noted that the output gap has virtually closed. “However, uncertainty around domestic inflation needs to be carefully monitored in the coming months,’’ it said. Stating that the recent global developments had raised some concerns, the MPC felt that the trade protectionism could pose a grave risk to near- and long-term global growth prospects by adversely impacting investment, disrupting global supply chains, and hampering productivity. “Geo-political tensions and elevated oil prices continue to be the other sources of risk to global growth,’’ it said.
“The progress of the monsoon so far and a sharper-than-the-usual increase in MSPs of kharif crops are expected to boost rural demand by raising farmers’ income. Robust corporate earnings, especially of fast-moving consumer goods (FMCG) companies, also reflect buoyant rural demand. Investment activity remains firm even as there has been some tightening of financing conditions in the recent period,’’ it said. Increased FDI (foreign direct investment) flows in recent months and continued buoyant domestic capital market conditions bode well for investment activity,” it added. Based on an overall assessment, the RBI retained the GDP growth projection for 2018-19, as in the June statement, at 7.4 per cent, ranging 7.5-7.6 per cent in H1 and 7.3-7.4 per cent in H2, with risks evenly balanced. The GDP growth for Q1:2019-20 is projected at 7.5 per cent.
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